Reporting Frequency, Information Precision and Private Information Acquisition

33 Pages Posted: 2 Feb 2010

See all articles by Rick Cuijpers

Rick Cuijpers

University of Maastricht - Department of Accounting and Information Management

Erik Peek

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Multiple version iconThere are 2 versions of this paper

Abstract

This study examines whether the choice between quarterly and semiannual reporting affects the precision of investors' information and their private information acquisition activities. In the first part of this study, we show that a firm's reporting frequency has no effect on the average precision of investors' information. However, our analysis of announcement-period price variance and share turnover shows that an increase in reporting frequency does make interim and annual financial reports a more important component of investors' information set, relative to other sources of information. In particular, the results of this analysis suggest that investors of semiannual reporters hold more precise pre-announcement information than investors of quarterly reporters. In the second part of our study, we test one explanation for this finding. We argue that an increase in a firm's reporting frequency reduces investors' incentives to acquire private information between consecutive announcement dates and, consequently, should reduce information asymmetry among investors, increase share liquidity, and stimulate trading. Consistent with this reasoning, we find that quarterly reporters have lower average bid-ask spreads and higher abnormal share turnover than semiannual reporters.

JEL Classification: M41

Suggested Citation

Cuijpers, Rick and Peek, Erik, Reporting Frequency, Information Precision and Private Information Acquisition. Journal of Business Finance & Accounting, Vol. 37, Nos. 1-2, pp. 27-59, January/March 2010. Available at SSRN: https://ssrn.com/abstract=1546166 or http://dx.doi.org/10.1111/j.1468-5957.2009.02180.x

Rick Cuijpers (Contact Author)

University of Maastricht - Department of Accounting and Information Management ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Erik Peek

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

Burg Oudlaan 50
Room T08-53
3062 PA Rotterdam, 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
3
Abstract Views
922
PlumX Metrics